State pension system headed for a crash
By Seth Grossman, Political Columnist
(Reprinted from September 22, 2010 Current-Gazette Newspapers of Atlantic
& Cape May Counties, http://www.shorenewstoday.com/index….r-a-crash.html)
On Jan. 25, 1990, a Colombian jetliner asked Kennedy International Airport
for permission to land when it was running out of fuel. The tower refused,
but when the plane ran out of fuel, it landed anyway, without permission. It
crashed in the village of Cove Neck on Long Island, killing 73 of the 149
people on board.
The pension system for 720,000 current and retired government and public
school employees in New Jersey is quickly running out of money. To avoid a
crash, we must immediately raise the retirement age, change the rules, and
cut benefits for everybody – including current retirees. But neither
Republican Gov. Christie nor any Republican or Democrat in the Legislature
dares to say so.
Liberty and Prosperity is a non-political education organization. We do not
support candidates or run for public office. But we do teach that we face
disaster unless a handful of qualified and dedicated citizens quickly agree
to be candidates in the June primary elections next year for state Senate
and Assembly. Without a massive “Tea Party” type change in state government
next year, the New Jersey pension system, and a whole lot more, will crash.
Public school and government employees under age 50 will be lucky to get 10
cents on their pension dollars.
New Jersey’s pension managers admit that their funds are $46 billion short.
But they also assume those funds will earn roughly 8 percent per year –
something we all know is ridiculous. Last week, the Mercatus Center at
George Mason University reported that real-world accounting methods show the
New Jersey pension funds are short $174 billion. This comes to $20,000 for
every man, woman and child in New Jersey, or $64,000 per household.
But since about half of New Jersey households pay little or nothing in state
taxes, the other half would have to pay roughly $120,000 in new state taxes
over the next 15 years. That’s an extra $700 per month mortgage payment just
to fund the pensions. That would be added to new federal and state taxes to
pay for Obamacare, windmills in the ocean, a new rail tunnel to New York,
paying off the trillion-dollar debts for the Wall Street bailouts and
stimulus programs, etc.
The public employee unions blame all this on Republican Gov. Christine
Whitman, who failed to contribute a few billion dollars to the pension fund
12 years ago. But every Democratic governor since has also stiffed the
pension fund. And even if they paid the full $3 billion each year, the
pension funds would still be broke.
That is because the New Jersey pension funds have been run like a Bernie
Madoff swindle for more than 20 years. There is no connection between what
public employees pay into the pension system while working and what they get
out when they retire.
Most public employees start with low salaries and contribute very little to
the pension funds in those early years. But they receive pensions based only
on their three highest years. Many have low-paying jobs for most of their
careers, and then “juice up” their pensions with big pay hikes or new,
high-paying jobs just before they retire. Thousands of government retirees
with political clout now make more money retired than they made during most
of the years they worked.
Early retirements and longer life spans are another problem. When these
pensions were created, most employees started working after high school at
age 18, retired at age 65 and died by age 70. They contributed for 47 years
and drew benefits for only five.
But today, public school and government employees are living longer, until
age 79, and retiring earlier. When they start work after college at age 23
and retire at age 48, they are contributing for only 25 years, but drawing
benefits for 31 years.
Many current and retired public employees claim they are entitled to get
everything they were promised. Didn’t they and their powerful union leaders
know that these pensions were a racket that was not sustainable?
State government is broke. As baby boomers retire, only big tax hikes on our
children can fund these pensions.
But today’s young people have fewer skills, less income and fewer
opportunities than we had. We are already taxing them for Obamacare, ocean
windmills, etc. We expect them to pay back student loans for overpriced
colleges, and the huge government debts for the Wall Street bailouts and
“stimulus” programs that did nothing for them.
And they should also pay for these pensions? How? Why?
Somers Point attorney Seth Grossman appears live on WVLT-92.1FM, heard
throughout South Jersey 8-9 a.m. every Saturday. For information see
www.libertyandprosperity.org, email firstname.lastname@example.org or
call (609) 927-7333. Breakfast discussions are held 9:30-10:30 a.m. every
Saturday at the Shore Diner, Tilton and Fire Roads, Egg Harbor Township.